Counterpoint, a market research organization, estimated that TSMC's capacity utilization of 7nm and 6nm would fall by 10%~20% to 80%~90% in the first half of next year. Before the third quarter of 2022, TSMC's 7/6nm nodes will be its largest revenue component.

TSMC pointed out in the recent legal conference that since the fourth quarter, the utilization rate of 7nm and 6nm capacity of TSMC will no longer be at the highest level in the past three years, due to the weakness of terminal markets such as smartphones and PCs, and the delay of customers' product progress. It is expected that this situation will continue to the first half of next year, because it will take several quarters to rebalance the semiconductor supply chain inventory to a healthy level.

Previously, TSMC had adjusted its capital expenditure on 7nm and 6nm, including the cancellation of the new 7/6nm production line in Plant 22 due to uncertain market demand, and the adjustment of the construction schedule of Kaohsiung 7nm wafer factory. TSMC believes that the demand for 7nm and 6nm is more cyclical than structural and is expected to rebound in the second half of next year.

Counterpoint judged that the AP and SoC inventory adjustment of 5G smartphones may last until next year, which is the main reason for TSMC's decline in capacity utilization of 7nm and 6nm, and TSMC's statement also reconfirmed this market change. Due to weak sales in the smart terminal market, before the demand for 5G smart phone AP and SoC orders has warmed up, TSMC's capacity utilization ratio of 7nm and 6nm in the next 2-3 quarters may fall to 80-90%, until new orders including WiFi and RF chips, SSD control IC and other new orders start to roll out, and the utilization ratio will rise significantly.